A central problem in biology is how to spatially regulate paracrine signals in tissues. Experiments in vitro suggest that heparan sulfate and chondroitin sulfate containing glycosaminoglycans (GAGs) and/or the proteins to which they are attached are important for modulating growth factor signaling. However, in vivo evidence to support this view has been scanty, in part because mutations that disrupt the production of GAG polymers and the core proteins have not been available. We have identified the suppenkasper gene (ska) in Drosophila and found that it encodes UDP-glucose dehydrogenase which is essential for the production of gluconate containing disaccharides which, in turn, are the building blocks of heparan and chondroitin sulfate GAGs. Surprisingly, mutations in this general metabolic gene produce mutant phenotypes suggesting a specific block in wingless signaling. Following this, we have also found that mutations in the Drosophila syndecan gene, a major source of heparan sulfates in vertebrates, interact genetically with mutations of dishevelled, a key component of the wingless signaling pathway. These observations demonstrate that proteoglycans and GAGs are important for growth factor signaling in vivo. However, they raise questions about the mechanism of action of syndecan in growth factor signaling in general and wingless signaling in particular. We propose to explore those mechanisms and to test a coreceptor model, a co-clustering model and a diffusion regulator model of the postulated Syndecan/Wingless interaction. These questions can be addressed by testing the effects of modified transgenes in vivo using developmental and genetic approaches. The involvement of proteoglycans in Wnt and possibly other growth factor signaling pathways adds a new dimension to the mechanism of signal transmission between cells. Both syndecan and suppenkasper have highly conserved homologs in mammals implying possible conservation of function. In addition, the wingless gene of Drosophila encodes a homologue of the tumor producing Int-1 oncogene of mammals and the dishevelled, shaggy and armadillo genes are all highly conserved downstream components of wingless signaling and are functionally interchangeable between vertebrates and Drosophila. Thus these studies will foster our understanding of the principles governing growth factor signaling in general and the WG signaling pathway in particular. Further, these in vivo studies may help in understanding the basis of some dysmorphologies in humans.